Supply Chain

REPORT TO DIRECTOR

1.0 INTRODUCTION

This report identifies and analysis the probabilities of progressing Revive & Renew pvt. in the terminal buildings of three largest and busiest international airports in India. In order for revive & renew to decide on the progression of express spa center in any of the three locations, Financial analysis and capital inverstment appraisals calculations are done based on assumptions and forecast. the reports is further suppoerted with the calculations of Net Present Values and Senstivity analysis for the three locations.

The capital Investment appraisal has been done on certain assumptions relating to the company's policies. Further recommendations on the bussiness environment on the three locations are done by PESTLE analysis by which capital investment decision can be made. The frame work of the business in any of the three locations could then be decided on the interpretation of the analysis, appraisals and identifying the risk factors behind them.

2.0 ANNUAL PROFIT,ANNUAL CASH FLOWS & PAY BACK PERIOD.

In many of the business process cash inflow and cash flow may not be taking place exactly at the end of the year but assuming SPA is a customer driven business with flow of hard cash after every treatment is done. hence annual profits, cash flows and payback period can be determined on an yearly basis. Annual Profits of revive and renew are calculated as per calculatios shown in the appendix A. Taking into assumptions that the residual value for the SPA equipment remains zero as per the company's policies they donot scrap their equipments or resells them in the market since SPA equipments being technologically updated each year and that resale value for the same are meaningless for the company putting their goodwill under pressure. Hence the comapny decides not to sell them. the annual profits arising out of the 3 airports are charged with relevant depriciations resulting in good profit in A & B and a marginal profit with the airport C.Pay back period simply answers the question of period of time taken for the investemnt to pay for itself throught the annual cash inflows that is expected to generate at the end of each year in the three airports. It supports more of a liquidity of the project hence lesser the PBP greater is the running of the business. hence the airports seems to return the investment by 1.66 yeras for A , 2years for B and 2.857 years for C as per the calculations in appendix A. It seems to be a fair play for any business to achieve their investments in half the way thought the project life. progressing in all the locations would be an ideal choice while considering the PBP but the choice should really be made by the financial anaysis and intrepreation rather blindly by the period of return of investment.

Annual cash flows on the locations A nd B seems fairngly good since it generates $300,000 and $225,000 respectively and C , a bit low equallying $112500 due to the number of treatmets undergone are low because of the external business factors.Net annual Cash inflows of a business depicts the profits of a business by considering only the inflows of cash.examining the airports in the 3 locations, A and B has a greater percentage of Net cash inflows and is most likihood for the progression to take place. It doesnot charge depriciation since it is a cash inflow.

3.0 Break Even Analysis & Margin Of Safety:

The simplest and foremst ananlysis for decision on progressing in the three locations is break even analysis. Its the basic state where companys profits can be calculated from the point of break even. And any number of treatments undergone form tht point results in a profits. even thought the three airports break even at the same intervals it is by margin of safety through which risk can be assesed. gretaer the margin of safety less the return of risk is. hence the below chart shows the differnt margin of safety. It surveys as the best practice for initial investment decisions.It clearly explains the relation between the costs such as variable and fixed. The break even point remains the same for all the three locations because Variable cost per unit and Sales price per unit remains the same. Hence Airport A and B supports better % of margin of safety 40 and 33.33 but where as C has only 20% which is situation of high risk. Considering the assumptions of no residual value and depriciation being also a part of fixed cost the results are depicted in the graph........---------. Break even analysis are not affected by the external factors hence capital investment appraisal is done by the four methods widely used. Later on senstivity analysis is done considering the external factors.

Airports Margin of safety in $ % Margin of safety

A $100000 40%

B $75000 33.33%

C $37500 20%

4.0 Capital Investment Appraisal :

Business operates on capital Investemnts which involves cash flows either by income or expenditure. Investing in a Project, initially involves a large outflow of cash either in equipments, machinaries or assets. subsquently with more cash inflows in the later period. Net Present Value method is one of the logical; and practical assesmnt through which